Correlation Between Nasdaq 100 and American Growth
Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and American Growth at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Nasdaq 100 and American Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq 100 Fund Class and American Growth Fund, you can compare the effects of market volatilities on Nasdaq 100 and American Growth and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Nasdaq 100 with a short position of American Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and American Growth.
Diversification Opportunities for Nasdaq 100 and American Growth
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Nasdaq and American is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 Fund Class and American Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Growth and Nasdaq 100 is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Nasdaq 100 Fund Class are associated (or correlated) with American Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Growth has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and American Growth go up and down completely randomly.
Pair Corralation between Nasdaq 100 and American Growth
Assuming the 90 days horizon Nasdaq 100 Fund Class is expected to generate 0.33 times more return on investment than American Growth. However, Nasdaq 100 Fund Class is 3.01 times less risky than American Growth. It trades about 0.09 of its potential returns per unit of risk. American Growth Fund is currently generating about -0.2 per unit of risk. If you would invest 7,858 in Nasdaq 100 Fund Class on September 12, 2024 and sell it today you would earn a total of 123.00 from holding Nasdaq 100 Fund Class or generate 1.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 Fund Class vs. American Growth Fund
Performance |
| Timeline |
| Nasdaq 100 Fund |
| American Growth |
Nasdaq 100 and American Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq 100 and American Growth
The main advantage of trading using opposite Nasdaq 100 and American Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, American Growth can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in American Growth will offset losses from the drop in American Growth's long position.| Nasdaq 100 vs. Nasdaq 100 Fund Class | Nasdaq 100 vs. Nasdaq 100 Fund Class | Nasdaq 100 vs. Nasdaq 100 2x Strategy | Nasdaq 100 vs. Dow 2x Strategy |
| American Growth vs. Prudential High Yield | American Growth vs. Msift High Yield | American Growth vs. T Rowe Price | American Growth vs. Payden High Income |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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